Nomura Securities analysts Harry C. Curtis, Louise Cheung, and Brian H. Dobson say no, it is not the right time for us to sell yet. These stocks have more upside. The analysts raised price targets for all three: MGM from $20 to $23, Las Vegas Sands from $69 to $77, and Wynn from $155 to $178.

As of this morning, MGM traded at $20, Las Vegas Sands at $65, and Wynn at $154 – a timely report.

The Macau gaming stocks only started to outperform the S&P when good macro news came out of China in August.

Nomura analysts think the Macau casinos will be doing alright, regardless of China’s macro economy, because gaming demand from the middle class (they are called mass market) there exceeds supply.

Here are the analysts:

Our overarching theses have been and continue to be that Macau’s growth from 2013 onward will be driven by growth in the mass segment, that the mass segment is under supplied, and that like all undersupplied markets, it grows through good economic times and bad. Short of an economic cataclysm in China, which Nomura is not expecting, we believe that growth in the mass segment in Macau should continue through 2017.

We are raising our 2014 Macau market growth estimateto 10% from prior 8.6% driven by an increase in mass (+24% from +19%), predominantly from our expectation that premium mass will continue to grow (recall: average premium mass EBITDA margin is ~27% vs. VIP’s ~10-15%). We are leaving our 2014 VIP estimate unchanged at ~4% given the large base.

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SEPTEMBER 19, 2013 11:53 A.M.

tfberynell wrote:

Good article. They nailed it. Undersupply is driving growth, plus just the simple fact that the Chinese mass market is gradually feeling more secure about their financial situation and want to travel relax after not being able to do so for so long;, and that means they want to travel and "gamble". JMHO

SEPTEMBER 19, 2013 1:16 P.M.

Spokanimal wrote:

I would add that undersupply will remain particularly acute as there will be no resort openings of any kind for the rest of 2013 and all of 2014.

It takes many years to acquire, plan, and build a resort on a parcel of land in Macau, and the dearth of resort openings now are a direct result of a shut-down of new construction during the recession of 2009 and 2010.

Since that time, only Galaxy and Las Vegas Sands have completed large gaming resorts on the Cotai Strip region of macau, and that is the reason why those 2 companies have expanded their market share in Macau so dramatically.

Sands, in particular, has dominated... growing it's gaming share from barely 13% in September of 2011 to almost 23% today. Furthermore, in September of 2011, Sand's share was 13% of a total Macau-wide gaming win of just 21 billion patacas... whereas this month, Sands will snag almost 23% of more than 30 billion patacas of macau-wide gaming revenues....

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Barron’s veteran Dimitra DeFotis has been blogging about emerging market investing since traveling to India and Turkey. Based in New York, she previously wrote for Barron’s about U.S. equity investing, including cover stories and roundtables on energy themes. Dimitra was among the first digital journalists at the Chicago Tribune and started her career as a police reporter at the Daily Herald in the Chicago suburbs. Dimitra holds degrees from the University of Illinois and Columbia University, where she was a Knight-Bagehot Fellow in the business and journalism schools.